Copyright Notice

Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

"From the beginning of 2001 through the third quarter of 2002, the federal government leapt from a surplus (including Social Security) amounting to 2.3 percent of gross domestic product to a deficit of the same size. By itself, the current deficit is not terribly threatening. Indeed, running a modest deficit during an economic downturn can be useful, as long as the policies behind the deficit — lower taxes and higher spending — benefit consumers and businesses."

The article then claims that the 1980s Reagan tax cuts failed to increase tax revenues;

"The White House says lower tax rates will lead consumers to work more and businesses to expand, resulting in higher tax revenues and eventually closing the budget gap. That notion, chided as "voodoo economics" by critics, turned out to be false when it was last in vogue, during the 1980's."

However, the numbers, crunched by Heritage's Brian Riedl, show otherwise (see chart below). In 1980, the last year before the tax cuts, tax revenues were $956 billion (in constant 1996 dollars).Revenues exceeded that 1980 level in eight of the next 10 years. Annual revenues over the next decade averaged $102 billion above their 1980 level (in constant 1996 dollars).

They even offer this chart as proof! (Click the link, expressed in constant 1996 dollars.) But the real Voodoo is in achieving an actual reduction in revenues, as they did according to the Heritage Foundation figures in 1982 and (quire dramatically) 1983, in the context of an economy that has achieved 3.7% annual growth for 200 years!

And that is key. Every year the population grows. Almost every year the economy grows. There is inflation in the background, most of the time. In fact, the compounded annual growth rate of federal tax revenues from 1970 through 2008 was just slightly over 7%. (Current dollars, not inflation adjusted.)

Actual revenues are shown on the broken red and blue line, with segments color-coded to indicate the party of the White House occupant. The purple curved line is the 7% growth line, starting in 1970. The pink line is the best-fitting straight line. Each President's term has also been overlayed with a best fitting straight line. In retrospect, these straight lines don't tell us much of anything.

One interesting facet of this display is that most of it lies well above the 7% growth curve. This is entirely due to increases during the Carter and Clinton administrations, as a visual inspection reveals, and we will also prove mathematically.

Here is the compounded annual growth rate of tax revenues, by President, over the 1970 to 2008 period.

Well, Nixon and Ford managed to top the long period average by a slight margin, but they were not under the thrall of Voodoo Economists. Neither was Clinton. Bush I wasn't either, but he inherited Reagan's vultures. Look at Reagan's revenue growth rate: 5.35%. Consider that average inflation over Reagan's years was 4.56%, and GDP growth averaged 3.4%. Under those circumstances, revenue growth should have been at least 7.96%, not a paltry 5.35%. The average compounded growth in constant 1996 dollars, using the Heritage Foundation table is 2.38%. This is more than a full percentage point below real GDP growth.

Bush II's revenue growth rate was 3.01%. But inflation averaged 2.84% and GDP growth averaged an anemic 2.16. Together they total 5.0%. So, Republican tax revenue growth cannot even match the inflation adjusted level of growth in the economy.

Many years ago, my dad told me that figures don't lie, but liars sure know how to figure. The bullshit you get from the Heritage Foundation is exactly what he was talking about. It's another example of the conservative ploy of willfully denying reality.

Change in Plans No. 2. Stock Market Musings are now located at Amateur Elliott

WELCOME READERS

Disclaimer

Do I need to point out that I am not a financial adviser, registered stock analyst, or anything other than a guy playing with ideas for his own amusement?

Get your own data, do your own thinking, make your own decisions. I am not telling anybody to do anything with even a single penny of their assets. Happy Speculating!

Gold - via www.kitco.com

Change in Plans

Starting Sunday, Feb. 6, 2010, light-hearted stuff has been moved to a new blog. If you are meant to find it, you probably will. If you need directions, write me.

Meanwhile the heavy-hearted - and heavy-handed stuff stays here.

Cheers!JzB

Rules of Engagement

Over at Angry Bear, Mike Kimel has posted a list of things to think about, if you want to be taken seriously. It might be worth your time to check it out. A few are specific to his situation, most are not.

Examples:#1 Don't cite authority as proof.#2 Get your data from a reputable source.#7 Do not argue by assertion.#15 Time moves in a single direction.